40: Private Equity Investing (Revised 2014)

Once an investor decides to allocate capital to private equity, the first question is: “How should I go about it?” Properly structured, private equity can be the most rewarding sector of an investment portfolio. Unfortunately, most investors in private equity don’t earn returns anywhere near what they need to compensate for the risks they have taken. The purpose of this paper is to summarize the private equity opportunity, identify the key risks, and outline a strategy for investing in private equity sensibly and profitably. This paper is designed to be useful to investors who are looking to put less than $50 million into a diversified private equity portfolio.